When you run your business from the road, staying on top of collecting the money owed to you is challenging, but essential. Developing accounts receivable processes can preserve the financial lifeblood of your business while making your entire collections effort take less time, says Michael Carney, CPA of MWC Accounting, an accounting and business advisory firm in Chicago, Illinois.
Carney offers these six tips to get your money faster:
1. Use a mobile payment system. Systems like Square and PayPal Here easily and inexpensively turn your mobile phone into a credit card payment terminal. With mobile payment systems, you can collect your payment or accept deposits on the spot with a simple swipe of a credit card and issue an electronic receipt on the spot instead of going back to your office, issuing an invoice, and waiting for payment.
2. Get invoices out on time. If you have accounts or lines of business for which mobile payments aren’t appropriate, be sure to get your invoices out in a timely manner, Carney says. If you only issue invoices at the end of the month, and you delivered your products or services at the beginning of the month, you could be adding on three to four weeks of additional time before you get paid. Issue invoices upon delivery or, at least, once each week.
3. Highlight the due date. It’s a simple tactic, but highlight the date by which the bill will need to be paid. If you offer early payment discounts, highlight those, too. That way, the customer is less likely to misunderstand the terms.
4. Be careful about extending credit. One of the best ways to ensure you’ll get your money on time is to make sure the customers to whom you issue credit have a timely record of paying their bills, Carney says. Have prospective customers fill out a credit application, and check their business credit report. You may also wish to limit the line of credit you issue so that it has to be paid off before the customer can buy more goods on credit.
5. Get a deposit. “It’s always a good idea to get a deposit or some good faith payment upfront,” Carney says. Customers who are serious about hiring you typically won’t balk if it’s a common practice in your business, and it relieves you from having the entire amount due at risk of being late or not collected at all, he says.
6. Avoid being “too nice.” Carney sees too many business owners who are afraid to call customers when payments are overdue. Set a time to follow up on overdue payments at least once a week, or hire someone to do so. The longer you let an account stay overdue, the more at risk the invoice is of not being paid at all, Carney says.